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Russia has fallen into full-blown depression and faces a mounting fiscal crisis as oil and gas revenues plummet.

As markets dry up in Europe, output from the state-owned gas giant Gazprom has collapsed by 19pc over the past year, to levels not seen since the company's creation at the end of the Cold War.

A report by Sberbank warned that Gazprom's revenues are likely to drop by almost a third to $106bn this year, from $146bn in 2014, seriously eroding Russia's economic base. Gazprom alone generates a tenth of Russian GDP and a fifth of all budget revenues.

The country's economy has contracted by 4.9pc over the past year and the downturn is certain to drag on as oil prices crumble again after a tentative rally. Half of Russia's tax income comes from oil and gas.

Core inflation is running at 16.7pc and real incomes have fallen by 8.4pc over the past year. There is no recovery in sight as Western sanctions remain in place and US shale oil limits any rebound in global oil prices.

"We've seen the full impact of the crisis in the second quarter. It is now hitting light industry and manufacturing," said Dmitri Petrov, from Nomura.

Lubomir Mitov, from Unicredit, said: "Russia is going to be in a very difficult fiscal situation by 2017.

"By the end of next year there won't be any money left in the oil reserve fund and there is a humungous deficit in the pension fund."

A report by the Higher School of Economics in Moscow warned that a quarter of Russia's 83 regions are effectively in default as they struggle to cope with salary increases and welfare costs dumped on them by President Vladimir Putin before his election in 2012. "The regions in the far east are basically bankrupt," said Mr Mitov.

Russian companies have to refinance $86bn in foreign currency debt in the second half of this year. They cannot easily roll this over since the country is still cut off from global capital markets, so they must rely on swap funding from the central bank.

The authorities can cover part of this from the country's current account surplus, but a "financing gap" of $10bn to $15bn a quarter remains. This implies a slow depletion of the central bank's foreign reserves.

The official reserves have dropped from $520bn to $360bn since the Ukraine crisis first erupted in late 2014. Unicredit said the true figure is nearer $340bn, once other commitments are stripped out.

Companies and banks have already slashed their hard currency debt by $170bn in a drastic deleveraging over the past 18 months at a huge long-term cost for Russia's productive economy.

"Frankly, I don't think they can weather this crisis, said Mr Mitov. "There has been almost no investment in new oil production except in Western Siberia. They are still relying on old Soviet wells."

The depletion rates in the traditional fields of Western Siberia are running at between 8pc and 11pc a year. Mr Mitov predicts a fall in oil output of 5pc to 10pc by 2018.

Leonid Fedun, Lukoil's vice-president, said in March that Russia's oil output could fall 8pc by the end of next year, taking 800,000 barrels a day (b/d) out of global markets.

Russian producers have taken advantage of a new tax regime to raise output this year to 10.7m b/d, close to the post-Soviet peak. But they are relying on legacy investments and imported machinery that must be replaced.

Mr Putin's long-term strategy depends on opening up the Arctic and the vast shale reserves of the Bazhenov basin and Volga-Urals. Drilling in these regions is covered by sanctions, forcing Western firms to freeze joint ventures.

Russia lacks the technology to make these projects viable. Average fracking costs in Russia are three times higher than the US's cutting-edge drilling.

The Russian authorities have allowed the rouble to fall rather than burning up reserves, but this policy is inflationary.

Russia bet its future on oil, gas and the commodity boom, letting its manufacturing base atrophy. It has been left high and dry by the commodity slump.

"The real problem is that Russia's economy is going nowhere," said Mr Mitov.

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